If you want to retire sooner, make a plan
Are you in your thirties or forties, or hoping to retire in the next 10 years? If you said yes, you’ll probably want to know the answers to the following questions: Is it possible for me to retire when I want? Will I be able to pay my bills? How can I be sure I’ll have the retirement I want?
However, for a variety of reasons, retirement planning is a frequently disregarded component of people’s lives, which can lead to concern as your retirement age approaches. We’ve outlined four strategies for increasing your pension contributions and achieving your retirement objectives sooner.
Increase your contributions annually
The simplest answers are sometimes the most successful. The most straightforward way to raise your retirement savings is to increase your contributions. You may believe you cannot afford it, yet even a small increase may have a significant impact.
Those who are fortunate enough to obtain annual wage raises in line with inflation will add significantly to their pension fund by simply raising their pension payments each year in line with your wage rises. The force of compounding returns explains why a seemingly little increase in pension contributions may result in such a large rise in the value of your pension account over the long term.
The sooner you invest your money, the greater compounding benefits you will receive. Adding additional money to your pension fund by raising your contributions enhances the compounding impact.
Where is it invested?
For many pension holders, failing to choose how their pension is invested is a squandered opportunity. Some people entrust this choice to their employer or pension providers.
Have you examined the fund that you are invested into? Does it suit your attitude to risk and long term investment strategy? What are the charges on the funds? All of these questions are critical and if you feel a little lost or overwhelmed it may be time to get some independent financial advice.
Know your allowances
When you invest for your retirement in a pension, the government gives tax relief on top of your contributions, allowing you to increase your savings more quickly. However, the quantity of contributions for which you can claim tax relief each year is limited by your ‘annual allowance.’ It is now £40,000 (for the tax year 2021/22), however, it may be lower in specific situations.
If you wish to contribute more to your pension than your annual allowance in one tax year (for example, if you’ve received a windfall and want to save money for the future), you can utilize any unused amount from the preceding three years (subject to your own personal allowance).
So, if you had £10,000 in unused allowance in each of the last three years, you maybe able to claim tax relief on another £30,000 this year. (This carry forward allowance would however depend on your own personal allowance-the subject of which is to broad to explain for this article). If you are unsure you should seek independent financial advice.
Understanding all your pensions
Beginning new employment with a new company usually entails starting a new pension. When this happens, some people may forget about the pension they received from their previous work. As a consequence, many people have forgotten about pensions from prior companies, and uncovering them might significantly increase your retirement funds.
You can track down former pensions by contacting the insurer. Examine any remaining papers from previous employment to see if you can locate your pension or insurance number. If you can’t, you may still call the provider, who should be able to locate your pension using additional information such as your date of birth and NI number. Start by asking your old employer if you don’t know who the provider is.